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CISG CASE PRESENTATION

Germany 20 March 1995 District Court München (Rancid bacon case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/950320g1.html]

Primary source(s) for case presentation: Case text


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Case identification

DATE OF DECISION: 19950320 (20 March 1995)

JURISDICTION: Germany

TRIBUNAL: LG München [LG = Landgericht = District Court]

JUDGE(S): Unavailable

CASE NUMBER/DOCKET NUMBER: 10 HKO 23750/94

CASE NAME: German case citations do not identify parties to proceedings

CASE HISTORY: Unavailable

SELLER'S COUNTRY: Italy (plaintiff)

BUYER'S COUNTRY: Germany (defendant)

GOODS INVOLVED: Frozen bacon


Case abstract

Prepared by Camilla Andersen for commentary on notice issues under Article 39(1)

"In a case concerning frozen bacon, the Court found a telex claiming 'the goods are rancid' sent on the day of discovery of non-conformity did not meet the requirement of Article 39, and that the subsequent [more specific] notice was not given with reasonable time. The Court found that the buyer should not have hesitated to specify the non-conformity more carefully in the first notice." Andersen, Pace Review of the Convention on Contracts for the International Sale of Goods (1998) 103-104. Noting that the frozen bacon proved to be rancid upon veterinary examination, Andersen states, "Dr. Kindler criticizes the Court for not examining the (hypothetical) question of whether the veterinary examination revealing the rancidness could or should have been carried out sooner. See Peter Kindler, Praxis des Internationalen Privat- und Verfahrensrechts (IPRax), Vol. 1, 16-17 (1996)." Id. at 104 n.128.

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Classification of issues present

APPLICATION OF CISG: Yes [Article 1(1)(a)]

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 4 ; 7 ; 38(1) ; 39(1) ; 45 ; 49(2)(b)(i) ; 74 ; 78 ; 81(2) [Also cited: Articles 35; 53 ] [Also relevant: Article 61 ]

Classification of issues using UNCITRAL classification code numbers:

4B [Issues covered and excluded (issues excluded): set-off];

7C [Interpretation of Convention: gap-filling];

38A1 [Buyer's obligation to examine goods (time for examining goods): as soon as practicable in the circumstances];

39A11 ; 39A2 [Requirement to notify seller of lack of conformity: buyer must notify seller within reasonable time; Degree of specificity required];

45A [Remedies available to buyer: declaration of choice of remedy];

49B1 [Buyer's right to avoid contract: failure to avoid within periods specified in Article 49(2)(a) and (b)];

74A [Damages (general rules for measuring): loss suffered as consequence of breach (cost of inspection)];

78B [Interest on delay in receiving price or any other sum in arrears: rate of interest] ;

81C [Restitution by each party of benefits received]

Descriptors: Scope of Convention ; Set-off ; Examination of goods ; Lack of conformity notice, timeliness ; Lack of conformity notice, specificity ; Cumulation or election of remedies ; Avoidance ; Restitution ; Damages ; Interest

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Editorial remarks

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Citations to case abstracts, texts, and commentaries

CITATIONS TO ABSTRACTS OF DECISION

(a) UNCITRAL abstract: Unavailable

(b) Other abstracts

English: Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=187&step=Abstract>; European Current Law Yearbook (1996) No. 1083 [490-491]

German: Schweizerische Zeitschrift für Internationales und Europäisches Recht (SZIER)/Revue suisse de droit international et de droit européen (1996) 47 [cited as 20 March 1994]; [1997] 10 Jahrbuch für Italienisches Recht (JbItR) 210

Italian: Diritto del Commercio Internazionale (1997) 732-733 No. 144

CITATIONS TO TEXT OF DECISION

Original language (German): cisg-online.ch <http://www.cisg-online.ch/cisg/urteile/164.htm>; Die Deutsche Rechtsprechung auf dem Gebiete des internationalen Privatrechts im Jahre (IPRspr) 1995 No. 41 [76-77]; Praxis des internationalen Privat- und Verfahrensrecht (IPRax) 1996, 31-33; [1996] 9 Jahrbuch für Italienisches Recht (JbItR) 197-200; Recht der Internationalen Wirtschaft (RIW) 1996, 688-689; Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=187&step=FullText>

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

English: Ferrari, International Legal Forum (4/1998) 138-255 [253 n.1079 (interest issues)]; Kizer, 65 University of Chicago Law Review (1998) 1279-1306 [comments on interest rulings in this case and other cases]; for a survey of German case law on specifying the nature of the non-conformity, go to 1998 Pace essay by Camilla Baasch Andersen at Section III.1.1.; Liu Chengwei, Recovery of interest (November 2003) n.92; Larry A. DiMatteo et al., 34 Northwestern Journal of International Law & Business (Winter 2004) 299-440 at n.413; CISG-AC advisory opinion on Examination of the Goods and Notice of Non-Conformity [7 June 2004] (this case and related cases cited in addendum to opinion); [2004] S.A. Kruisinga, (Non-)conformity in the 1980 UN Convention on Contracts for the International Sale of Goods: a uniform concept?, Intersentia at 73, 90; Article 78 and rate of interest: Mazzotta, Endless disagreement among commentators, much less among courts (2004) [citing this case and 275 other court and arbitral rulings]; [2005] Schlechtriem & Schwenzer ed., Commentary on UN Convention on International Sale of Goods, 2d (English) ed., Oxford University Press, Art. 39 para. 9 Art. 49 paras. 24, 32; Henschel, The Conformity of Goods in International Sales, Forlaget Thomson (2005) 157

Finnish: Huber/Sundström, Defensor Legis (1997) 747 [759 n.62]

German: Gaus, [1997] Wirtschaftsrechtliche Beratung (WiB) 181 [184 n.47]; Kindler, Praxis des internationales Privat-und Verfahrensrechts (IPRax) 1996, 16-22; Piltz, Außenwirtschaftliche Praxis (AW-Prax) (1997); 129-130

Spanish: Perales, Cuadernos Jurídicos 3 (1996) No. 43, 5 [7 n. 27] [commentary on Article 78: determination of rate of interest under the CISG (review of case law)]

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Case text (English translation)

Queen Mary Case Translation Programme

District Court (Landgericht) München

20 March 1995 [10 HKO 23750/94]

Translation [*] by Ruth M. Janal [**]

Translation edited by Camilla Baasch Andersen [***]

Facts of the case

The [seller], an Italian exporter of meat, brings an action for payment of the purchase price against the [buyer], a meat importer.

By fax of 12 November 1993, the [buyer] ordered from the [seller] 10 tons of bacon, frozen and without rind, at a price of DM [Deutsche Mark] 1.38 per kilogram. The goods were delivered in two installments on 22 November and 26 November 1993. The [buyer] paid the invoice for the first installment in full in the amount of DM 11,405.70, but failed to pay the second invoice for DM 2,664.78.

By telex of 21 December 1993, the [buyer] notified the [seller] that "a customer just complained that the rind has not been cleanly removed from the bacon. It wants to return the goods. After we receive the returned the goods [from the customer] we will notify you of the amount concerned." The [seller] rejected that complaint on the same day.

In its telex of 22 December 1993, the [buyer] further contended that its customer had put the goods at [buyer]'s disposal because the bacon was rancid. The [buyer] claimed a hidden non-conformity of the goods and proposed that the parties consult an independent expert. This complaint was also rejected by the [seller] because the goods had been delivered over a month ago. The [buyer] replied on 23 December 1993 with the comment that the hidden lack of conformity of the goods was not detectable at the time of delivery. The [seller] did not accept the [buyer]'s objection. The [buyer] had the bacon examined by a veterinary expert on 11 January 1994 and invoiced the [seller] on 8 February 1994 for the purchase price already paid.

Subsequently, the [buyer] ordered on 27 April 1994 ten tons of pork, frozen and without rind, at DM 1.20 per kilogram as well as 1 ton of frozen bacon with rind at a price of DM 2 per kg. These goods were delivered to the [buyer] on 29 April 1994 and the [buyer] was invoiced with an overall amount of DM 14,666.40.

The [buyer] also failed to pay this amount.

With telex of 6 May 1994, the [buyer] notified the [seller] that the queried goods were ready for the [seller]'s collection and that the goods would be disposed of if the [seller] did not collect them by 11 May 1994.

Upon the [seller]'s request for payment, the [buyer], by telex of 17 May 1994, declared a set-off with the alleged claims invoiced on 8 February 1994 as well as other costs.

Following a further request for payment made by the [seller]'s attorney on 3 June 1994, the [buyer] failed to pay for both the delivery of 26 November 1993 and the delivery of 29 April 1994.

[Seller's position]

The [seller] denies lack of conformity of the goods in the first delivery. [Seller] submits that the [buyer] did not examine the goods in due time and that the alleged rancid quality of the bacon does not constitute a hidden non-conformity. Furthermore, [seller] pleads that under Italian law a set-off cannot be declared against disputed claims.

The [seller] requests that the [buyer] be ordered to pay to the [seller] DM 17,523.18 plus 15.5% interest on DM 2,664.78 from 1 June 1994, as well as 15.5% interest on DM 14,666.40 from 14 April 1994.

[Buyer's position]

The [buyer] requests that the [seller]'s claim be dismissed.

The [buyer] asserts that the queried bacon was rancid. At the time of the delivery, the [buyer]'s knowledgeable employees had performed spot checks of the goods, which were delivered frozen and packaged in cardboard boxes. No defects were discovered. The goods were then delivered to company J.B. and were re-dispatched by that firm. Only the final customer was able to discover the rancidity of the goods after defrosting them. The notice of the lack of conformity was then immediately given. [Buyer] submits that it is irrelevant whether a set-off is possible under Italian law, because the set-off is directly possible as a general remedy under the CISG.

Reasoning of the Court

The admissible claim of [seller] is essentially justified, apart from an amount of DM 192 and the rate of interest.

Under Art. 53 CISG, the [seller] is entitled to payment of the purchase price both for the delivery of 26 November 1993 and the delivery of 29 April 1994.

1. Remainder of the purchase price in the amount of DM 2,664.78

Even under the assumption that the delivered bacon did not conform to the contract (Art. 35 CISG) and that the [seller] committed a fundamental breach of contract (Art. 25 CISG), the [buyer] is not released from its obligation to pay the purchase price pursuant to Art. 81 CISG. The [buyer] did not give a proper notice specifying the alleged lack of conformity under Art. 39 CISG and furthermore did not make a timely declaration of avoidance of contract under Art. 49(2) CISG.

Even if one follows the [buyer]'s account that the queried rancidity of the bacon constituted a hidden non-conformity because it could not be discovered when the bacon was frozen, the [buyer] did not give a proper notice of that defect. The notice must specify the lack of conformity. In particular, the [buyer] should specify whether it queried both deliveries totally or only in part. The fact that both deliveries were queried can only be inferred from the weight (10,729 kg) mentioned in the invoices issued by the cold-storage depot, which the [buyer] submitted with its statement of defense. In contrast, the [buyer]'s invoice of 8 February 1994 is based on the weight of the first delivery (8,265 kg). The [buyer] would have been able to specify the defect within a few days after the veterinary examination of 11 January 1994. In view of the considerable cold-storage costs, the [buyer] was obliged to act quickly. In the Court's opinion it could even be argued that - despite the holidays - the [buyer] was not entitled to wait with the commissioning of the expert until 10 January 1994, after [buyer] had become aware of the rancidity of the goods on 22 December 1993.

Even if one assumes that the [buyer] did give a proper and timely notice of the lack of conformity, the [buyer] took too much time until it declared the contract avoided. Such a declaration can by no means be seen in the invoice of 8 February 1994.

Apart from the fact that the [buyer] submits that it did in fact send this invoice to the [seller], the invoice does not contain a clear statement regarding the future of the contract. It needs to be taken into account that the CISG gives the buyer a number of remedies for breach of contract by the seller, Art. 45 CISG. For example, the buyer is not deprived of any right it may have to claim damages by exercising its right to other remedies, Art. 45(2) CISG. Therefore, the seller must be able to infer from the buyer's declaration which remedy it is that the buyer relies on. It could easily be inferred from the last line of the [buyer's] invoice of 8 February 1994 ("cold-storage costs, damage inspector, etc. will be invoiced separately") that the [buyer] was essentially claiming damages. It is also not clear from the [buyer]'s pleadings during the Court proceedings upon which of the remedies available under the CISG the [buyer] wishes to base its claims. Only from the fax of 6 May 1994, in which the [seller] was notified that the queried goods were ready for its collection, could one imply a claim for restitution according to Art. 81(2) sent. 2 CISG. In any case, this implicit declaration of avoidance would have been too late, Art. 49(2)(b)(i) CISG. Even if the seller does not accept that the goods lack conformity, the buyer cannot take four months to announce whether the contract will be avoided or not. Such a period is not reasonable in the food trade.

2. Purchase price for the delivery of 29 April 1994 (DM 14,666.40)

It is undisputed between the parties that the claim for payment of the purchase price is overdue.

As with the claim for the remaining purchase price discussed under 1 (see above), the [buyer] is not entitled to set-off its claims under Art. 81(2) CISG (restitution of the purchase price) and Art. 74 (damages) respectively against the [seller]'s claim for payment of the purchase price of the delivery of 29 April 1994. In this regard, the Court can leave open the question whether the [buyer]'s claims with which it intends to declare a set-off are justified, because a set-off is not admissible under the applicable Italian law, Art. 1243 C.c. [*].

The Court has assumed international jurisdiction regarding the [buyer]'s counterclaims (cf. BGH [*] NJW [*] 1993, 2753), as a connection exists at least between the [seller]'s claim for the remaining purchase price and the [buyer]'s counterclaim; this connection gives the Court jurisdiction under Art. 6 no. 3 of the Brussels Convention [*].

Contrary to the [buyer]'s opinion, the set-off is not governed by the CISG (cf. Piltz, Internationales Kaufrecht, § 2 n. 148). The [buyer] has misunderstood the comment of Leser, in: v.Caemmerer/Schlechteriem, 2nd. ed., Art. 81 n. 16. Leser merely states that in principle a set-off should be possible. However, the question whether the preconditions for a set-off exist is to be settled in conformity with the law applicable by virtue of Art. 32 EGBGB [*]. This is Italian law as the law of the [seller]'s place of business, Art. 32(1) no. 4 in connection with Art. 28(1) and (2) sent. 1 EGBGB. Italian law distinguishes between statutory and judicial set-off (cf. Information of the Italian Department of Justice of 14 October 1989, Jahrbuch für italienisches Recht, vol. 6, p. 254 et seq.).

The requirements for a statutory set-off (compensazione, Art. 1243(1) C.c. [*]) are not met, because the [buyer]'s claim is not liquidated and enforceable in the same manner; by liquidated claim is meant a claim ripe for ruling (cf. Kindler, Einführung in das Italienische Recht, § 14 n. 15); in the present case the [seller]'s objection [to the [buyer]'s claim] cannot be viewed as evidently unfounded.

Regarding the judicial set-off (Art. 1243(2) C.c.) it first needs to be said that this remedy, which is unknown to German law, has to be classified as substantive law and not as a procedural provision. The different form of the set-off in different legal systems (substantive/procedural) may not lead to the result of a refusal of rights in front of a German court (cf. Schack, Internationales Zivilverfahrensrecht, n. 354).

Therefore, the application of Art. 1243(2) C.c. does not fail because it is a formative act undertaken by the judge. However, the preconditions for a judicial set-off are also not met, because the [buyer]'s disputed claim, with which it intends to declare a set-off, is not easily and immediately determined. It requires an extensive hearing of evidence. The matter can be compared with the limited right to set-off in carriage law under § 32 ADSp [*].

However, the sum of the two claims made by the [seller] only comes to DM 17,331.18. The [seller's] claim is therefore dismissed with respect to the minimal additional amount.

3. Interest

The [seller] is entitled to interest for the mature claims for payment of the purchase price without having to send a reminder of payment, Art. 78 CISG. Since the [seller] did not prove the (contested) rate of interest by submitting a confirmation of its bank, [seller] is only granted 10% interest under Art. 1284(1) C.c. [*]. Italian law must also be applied in this respect to fill a gap in the Convention.


FOOTNOTES

* All translations should be verified by cross-checking against the original text. For purposes of this translation, the Plaintiff of Italy is referred to as [seller]; the Defendant of Germany is referred to as [buyer]. Amounts in German currency (Deutsche Mark) are indicated as [DM].

Translator's note on other abbreviations: ADSp = Allgemeine Deutsche Spediteurbedingungen [General Terms and Conditions of the German Forwarding Trade]; BGH = Bundesgerichtshof [Federal Court of Justice, the highest German Court in civil and criminal matters]; Brussels Convention = Convention of 27 September 1968 on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters; C.c. = Codice civile [Italian Civil Code]; EGBGB = Einführungsgesetz zum Bürgerlichen Gesetzbuche [German Code on Private International Law]; NJW = Neue Juristische Wochenschrift [pre-eminent German law journal].

** Ruth M. Janal, LL.M. (UNSW), a PhD candidate at Albert-Ludwigs-Universität Freiburg, has been an active participant in the CISG-online website of the University of Freiburg. The second-iteration redaction of this translation was by Dr. John Felemegas of Australia.

*** Camilla Baasch Andersen is a Lecturer in International Commercial Law at the Centre for Commercial Law Studies, Queen Mary, University of London, and a Fellow of the Institute of International Commercial Law of the Pace University School of Law. She is currently finishing her PhD thesis on uniformity of the CISG at the University of Copenhagen.

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